Reduction In Net Present Value Research Articles

Estimated economic impact of fire blight on long-term orchard economic performance with susceptible and resistant rootstocks

We estimated the economic impact of theoretical fire blight induced tree loss using data from two long-term field trials in NY State. An economic analysis of profitability using Net Present Value (NPV) was conducted with three cultivars, eleven rootstocks and four planting systems. The impact of fire blight was modeled in terms of both the severity of the disease and the year of infection. We considered a range of scenarios with different infection rates (10 %, 50 %, 80 % and 100 %) of all the trees planted and different timings when the infection took place including the 1st year (prior to production), 5th year, 10th year and the 15th year during the life cycle of an orchard. The analysis showed that the smallest impact of fire blight induced losses on lifetime NPV occurred when the fire blight infection and tree death occurred in year 1 and was greatest when infection and tree death occurred in year 10. If the infection occurred in year 15 then the losses in NPV were less. As expected, the analysis showed that a low percentage of tree loss due to fire blight at any given year of the orchard life resulted in a low impact on lifetime NPV while greater levels of infection and tree loss were associated with higher losses in NPV. The use of fire blight resistant rootstocks dramatically reduced the negative impact of fire blight induced tree losses on NPV. With susceptible rootstocks (M.9 and M.26), the reduction in NPV with high levels of tree infection was as high as 70 % which would render the planting unprofitable, while with resistant rootstocks the losses in NPV were lower (<30 %) and the orchard would still be profitable. High-density orchard systems like the Tall Spindle system had less sensitivity to fire blight induced losses than lower density systems. Cultivar also had an important effect on the level of fire blight induced losses of NPV. With a high priced cultivar like ‘Honeycrisp’ the percentage loss in NPV was less than with the lower priced cultivars like ‘Fuji’ and ‘Gala’.

State support measures for import substitution impact on the investment projects efficiency in the power industry

In the structure of thermal generation of the Russian Federation, the share of modern combined-cycle plants, characterized by low specific fuel consumption (CCGT), is only 16 % and is based on the use of Western-made gas turbines. To stimulate import substitution, as measures of state support, special prices for capacity produced by new generation are used, and tax incentives are provided to investor enterprises. The paper assesses the impact of existing state support measures on the commercial efficiency of the investment project for the construction of a CCGT-120 on Russian equipment in the city of Saki (Republic of Crimea). The indicators of net present value (NPV), internal rate of return (IRR) and payback period for three scenarios (basic and two alternative, differing in the composition of state support measures) are considered. It is shown that the use of a special capacity tariff for new generation (competitive capacity extraction of new generating facilities – KOM NG) and tax incentives ensures the project’s profitability at the level of 18.7 % and the payback period is 7 years. Refusal to provide special tariffs for the capacity will cause the project to become unprofitable. The abolition of tax incentives will lead to a reduction in NPV by 40 %, a decrease in the project’s profitability to a critical level of 14.7 % and an increase in the payback period by 2 years. In order to rise the commercial efficiency of investment projects for the installation of CCGT units on Russian equipment and reduce the scale of their state support, it is necessary to increase the volume of heat supply and optimize investment costs.

Analysis of economic viability under risk conditions of a beef cattle feedlot system in São Paulo State, Brazil

Purpose: Assess the sensitivity and economic viability of the beef cattle feedlot system using as a reference a farm located in northern São Paulo State, Brazil.&#x0D; Methodology: A multidimensional approach was used to assess sensitivity. Financial results were analyzed in terms of cash flow using the net present value (NPV) as a viability indicator. Risks were incorporated using Monte Carlo simulations, considering feed, animal purchase, and animal selling prices as discrete random variables. The value measure was NPV, calculated using a minimum attractive rate of return of 7.55% per semester. Probabilities were estimated by relative frequency analysis.&#x0D; Results: The probability of a feedlot being economically attractive was 30.2%, indicating that the system was not viable in 69.8% of the cases. Sensitivity analysis showed that the feedlot was most vulnerable to fluctuations in selling price (a 1% increase in fed cattle price generated a 46% increase in NPV), followed by feeder cattle price (a 1% increase in feeder cattle price led to a 29% reduction in NPV) and feed price (a 1% increase in feed price produced a 12% reduction in NPV).&#x0D; Contributions of the Study: The findings of this study may support new evaluations in representative samples, complement previous studies on the topic, and assist decision makers.

Potential impact of global warming on wind power production in Central Asia

AbstractGlobal warming is affecting the Earth's surface temperature and consequently the intensity of near‐surface airstreams and wind power potential in many regions. Conversely, global wind power installed capacity is continuously growing during the last years. The economic viability and sustainability of centralized wind projects relies heavily on wind resources, efficient technologies, and an attractive and dynamic Feed‐in‐Tariff (FIT). Therefore, this study assesses the potential effect of global warming on the life‐cycle techno‐economic viability of future wind power projects in Central Asia, specifically in Kazakhstan. Hence, the Ereymentau Wind Power Plant (WPP) in the Northern region of Kazakhstan was selected as case study. Historic data showed that monthly averaged wind speed and ambient pressure can be treated as statistically stationary, and only the air density drop due to temperature increase of 0.2°C per decade is assumed in the present study. Our results predict a reduction in Net Present Value, Benefit–Cost Ratio, and Internal Rate of Return of 29 million KZT, of 0.0015, and 0.03%, respectively, in the lifetime of Ereymentau WPP. Moreover, an Equity payback increase of 0.4 years and a drop of 987 tCO2e in GHG emission reductions are projected. Consequently, our results indicate that global warming, despite of being a global problem of significance, would have a negligible impact in ongoing plans to develop the wind potential in Northern regions of Eurasian countries sharing similar conditions to those present in Ereymentau‐Kazakhstan.

Economic effects of grouse-friendly forest management

Traditional timber production may have negative effects on other ecosystem services. Therefore, new forest management guidelines have been developed in order to enhance a habitat suitable for wildlife. In Finland, a recent example of this is grouse-friendly forest management (GFFM) which emphasises the preservation of grouse species (Tetronidae) habitats. This study aimed to analyse the economic effects of these guidelines. An analysis was made on how the application of GFFM affected the Net Present Value (NPV) in a 30-year simulation of forest management of four large forest holdings located from south to north in Finland. In the simulations, traditional forest management practices were compared to two levels of GFFM. Five levels of interest rate were used, namely 1, 2, 3, 4, and 5%. In most of the simulations, the NPV was reduced by about 1% or less due to the application of GFFM in comparison to the traditional reference forest management. Only in one case with more intensive GFFM, was the reduction of NPV more than 5%. The interest rates had an impact on the differences between the management approaches. For example, a low interest rate resulted in a higher thinning intensity in GFFM in comparison to traditional forest management, which lead to a higher NPV in GFFM. To sum up, it seems that it would be possible to manage forest holdings in a grouse-friendly manner with minor effects on the economics.

The integrated optimization of underground stope layout designing and production scheduling incorporating a non-dominated sorting genetic algorithm (NSGA-II)

Stope layout designing and production scheduling are main phases to determine the profitability of an underground mining project. These are mainly related to the output of one phase, which has a significant impact on generating of the next phase. Individual optimization of these two phases results only in a local optimal solution. To date, the integrated optimization of these phases has been carried out to maximize net present value (NPV). In this paper, a multi-objective integer programming model (MOIP) was developed to optimize this integrated problem in a sublevel stoping operation. The non-dominated sorting genetic algorithm (NSGA-II) was incorporated to solve the objective functions. The Pareto front generated by NSGA-II showed good convergence and diversity with the solution time decreasing significantly (from 7-8 days to 6–7 h). The most preferred solution point on the Pareto front increased recovery by 18.55% in exchange for a 0.41% reduction in NPV with respect to the single objective optimization to maximize NPV.

A novel optimization model for dynamic power grid design and expansion planning considering renewable resources

Growing demand for electricity has made power grid design and expansion planning one of the main challenges in power industry management. In recent years, reconfiguration of existing power grid along with the adoption of renewable power generation leads to a significant reduction in expansion costs and GHG emissions. This paper offered a novel optimization model to address the design and planning of power grid expansion in a dynamic environment. Besides capacity planning, the model also determines location and time to construct new facilities. This research aims to satisfy demand by considering reduction in net present value of costs and increase in network efficiency. Electricity tariff and cost of load shedding differ according to different power consumers (i.e., residential, commercial, industrial and agricultural). Due to inherent intermittency in renewable energy resources and their subsequent impact on the entire power grid, different scenarios are generated, and the model is solved using the sample average approximation method. Eventually, validation of the proposed model and sensitivity analysis is carried out through a real case study in Iran. Computational results demonstrate the practicality of the stochastic model and show integration of renewable power plants would decrease the transmission and sub-transmission network costs.

Economic value of ecological information in ecosystem-based natural resource management depends on exploitation history

Ecosystem approaches to natural resource management are seen as a way to provide better outcomes for ecosystems and for people, yet the nature and strength of interactions among ecosystem components is usually unknown. Here we characterize the economic benefits of ecological knowledge through a simple model of fisheries that target a predator (piscivore) and its prey. We solve for the management (harvest) trajectory that maximizes net present value (NPV) for different ecological interactions and initial conditions that represent different levels of exploitation history. Optimal management trajectories generally approached similar harvest levels, but the pathways toward those levels varied considerably by ecological scenario. Application of the wrong harvest trajectory, which would happen if one type of ecological interaction were assumed but in fact another were occurring, generally led to only modest reductions in NPV. However, the risks were not equal across fleets: risks of incurring large losses of NPV and missing management targets were much higher in the fishery targeting piscivores, especially when piscivores were heavily depleted. Our findings suggest that the ecosystem approach might provide the greatest benefits when used to identify system states where management performs poorly with imperfect knowledge of system linkages so that management strategies can be adopted to avoid those states.

Economic analysis of a combined power and desalination plant considering availability changes due to degradation

In a conventional economic analysis, the availability of system is considered as a constant value. However, some factors such as increasing components' failure rate due to degradation, reducing failure rates by replacement or repairing, and stops in operation because of overhauls change the availability during the lifetime of a system. Furthermore, due to overhauls and degradation, maintenance costs are not identical in different years. This paper presents a new approach for economic analysis of thermal systems in which change in the availability of system during its lifetime is considered. A combined gas turbine cycle and desalination is studied. The instantaneous availability of system is calculated using state space method with time-varying failure rates and considering overhauls. Then, the average availability of producing electricity and fresh water in each year of lifetime is applied to the economic analysis. In addition, maintenance costs are calculated according to the overhauls and the number of components repairs in each year. Finally, some economic indicators are compared in two cases of variable and constant availability, using the life cycle cost analysis method. Considering time-varying availability, increase in payback period is observed by 9months and reduction in net present value by about $18 million.

Haircut Size, Haircut Type and the Probability of Serial Sovereign Debt Restructurings

This paper complements the empirical literature on sovereign debt restructurings by analyzing potential determinants of (near-term) follow-up restructurings after a re-structuring has taken place. The probability of follow-up restructurings is estimated by means of survival models using a unique dataset provided by Cruces and Trebesch (2013). I find that more comprehensive debt remissions decrease the probability of serial restructurings significantly. Moreover, reductions in net present value due to out-right face value haircuts reduce the probability of serial restructurings more strongly than equally sized reductions in net present value due to maturity extensions and/or interest rate reductions. One possible explanation may be found in the timing of debt remissions: While a cut in face value provides direct and instant relief, maturity exten-sions and/or lower interest rates only unburden a country slowly over time.

Multi-year water allocation: an economic approach towards future planning and management of declining groundwater resources in the Texas Panhandle

Heavy withdrawals from the Ogallala Aquifer, the most dependable source of groundwater in the Texas Panhandle, create an impending need for implementing water conservation policies. This study evaluates the policy option of multi-year water allocation coupled with water-use restriction in Regional Water Planning Area-Region A of Texas, over a 60-year planning horizon for 4 study counties, namely Dallam, Sherman, Moore and Hartley. Dallam County is studied as a representative county and results compared with other study counties. For the unconstrained baseline scenario over 60 years, the counties of study show a decline in saturated thickness that recommends the incorporation of water-use restriction alternatives at different rates. Increasing restrictions rates led to decline in water use per acre as well as total annual water use. Such restrictions, if mandated by the water conservation districts, will result in individual irrigators bearing the cost of water savings in the form of reduction in net present value per acre. The decline in net present value may have implications to the regional economy, and therefore, it is crucial to analyze the socio-economic effects of implementing such a policy alternative and analyze the feasibility in the light of legislative and political scenarios. Citation: Tewari R, Almas LK, Johnson J, Golden B, Amosson SH, Guerrero BL. 2014. Multi-year water allocation: an economic approach towards future planning and management of declining groundwater resources in the Texas Panhandle. Texas Water Journal. 5(1):1-11. Available from: https://doi.org/10.21423/twj.v5i1.6390.

Assessment of NPV Uncertainty on Heterogeneous Reservoirs during Polymer Flood

This study shows net present value (NPV) distribution by considering uncertainties in porosity, oil viscosity, water saturation, and permeability for polymer flood with Monte Carlo simulation. For high and low average permeability conditions, differences of NPV between polymer flooding and water flooding have been investigated. According to results both average NPV and range of NPV distribution tend to increase with porosity and permeability in all cases. Although water saturation and oil viscosity affect NPV, they are not important parameters that conclude uncertainty of NPV under the conditions considered in this study. For high permeability model which has Dykstra-Parsons coefficient (DP) as 0.72 and porosity as 0.3088, Monte Carol simulations for polymer flood show that 50th percentile (P50) of NPV is 352.81 M$. If porosity is decreased from 0.3088 to 0.1912, the P50 is also decreased 63.8 %. The reduction of NPV during polymer flooding in low permeability reservoirs are almost 40 % higher than that of water flood. These differences come from polymer adsorption and permeability reduction that easily occurs in low permeability zone. The procedure has proven to be useful tool to generate probability distribution of NPV when polymer flood is selected as a tertiary flood process.

Network Impacts and Cost Savings of Controlled EV Charging

This paper investigates the distribution system impacts of electric vehicle (EV) charging. The analysis is based on a large number of operational distribution networks in The Netherlands. Future load profiles have been constructed by adding different EV charging profiles to household loads and solving the power flows to assess the network impacts on various network levels. The results indicate that controlled charging of EVs leads to significant reduction of overloaded network components that have to be replaced, but the impact varies per network level. Overall, in the uncontrolled charging scenarios roughly two times more replacements are needed compared to the controlled charging scenario. Furthermore, it was shown that for the controlled charging scenario the overall reduction in net present value due to energy losses and the replacement of overloaded network components is approximately 20% in comparison with the uncontrolled charging scenario. The results suggest that the deployment of a flexible and intelligent distribution network is a cost-beneficial way to accommodate large penetrations of EVs.

Influência do cálculo de depreciação no imposto de renda e no fluxo de caixa de uma atividade de transporte florestal

Este trabalho buscou ilustrar um cenário de alternativas na cobrança de impostos, baseado em diferentes métodos de depreciação. A referência foi a atividade de transporte florestal, sendo o estudo desenvolvido para o caminhão bitrem. O fluxo de caixa foi calculado antes e depois dos impostos, sendo estes determinados com base num porcentual incidido sobre a renda tributável, que variou em função das metodologias utilizadas no cálculo da depreciação. Após a elaboração do fluxo de caixa pós-impostos, realizou-se um estudo econômico utilizando o Valor Presente Líquido (VPL). O impacto do imposto de renda ocasionou retrações na VPL de 53,36%, 52,22%, 50,54%, 48,07% e 47,72% quando se consideraram, respectivamente, os seguintes métodos de depreciação: soma inversa dos dígitos, fundo de renovação, linear, exponencial e soma dos dígitos. A metodologia mais compatível para o bitrem foi a mesma que apresentou maior VPL (soma dos dígitos), indicando que o método adotado pelo governo pode acarretar sobrecarga tributária. Isso reflete a necessidade de se estabelecerem critérios mais justos na cobrança de impostos, através da adoção de metodologias mais adequadas às realidades dos equipamentos.

Sharing of endogenous risk in construction

In risk management of complex procurement projects in construction, the buyer can affect the level of risk by careful project specification, or shift risk over to the supplier. Each of the alternatives imply costs for the buyer. The major specification cost is the reduction in net present value due to postponing of the project. Risk sharing by the buyer is costly even if the buyer is risk neutral, since lower risk exposure for the contractor implies weaker incentives and higher construction costs. We model this trade-off in a risk sharing model with endogenous risk.